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Friday, 27 June 2014

The dollar slumped to its lowest level in five weeks against the yen as U.S. Treasury yields fell amid signs of an uneven recovery in the world’s biggest economy.

The U.S. currency dropped below its 200-day moving average versus the yen for a third straight day as worse-than-expected U.S. economic data supported bets the Federal Reserve will keep borrowing costs near zero. New Zealand’s dollar briefly rose to within half a cent of a record high. The South Korean won advanced to the strongest since August 2008. Sweden’s krona weakened to a 2 1/2-year low against the euro as retail sales data boosted speculation the Riksbank will cut rates next week.

“The dollar has come under pressure and that’s a function of the yields coming back down,” Ian Stannard, head of European currency strategy at Morgan Stanley in London, said by telephone. Dollar-yen “breaking through the 200 day-moving average is obviously a significant event as far as market activity is concerned and that opens the way for dollar-yen to come under some further pressure.”

The dollar dropped 0.3 percent to 101.42 yen at 10:01 a.m. London time after sliding to 101.32, the lowest since May 21. The 200-day moving average was at 101.71 yen. The greenback has fallen 0.7 percent since June 20, heading for its steepest drop versus the yen since the five days ended April 11.

The U.S. currency depreciated 0.1 percent to $1.3621 per euro, set for a 0.2 percent weekly decline. The yen advanced 0.3 percent to 138.12 per euro, on course for a 0.5 percent five-day gain.

‘Psychological Barrier’

“For currency traders, breaking below the 200-day moving average is a big deal,” said Kumiko Ishikawa, a currency analyst at Gaitame.com Research Institute Ltd. in Tokyo. “It’s going to become an important psychological barrier.”

The yen gained amid speculation the Bank of Japan will refrain from boosting monetary stimulus after official data showed Japanese consumer prices rose last month at the fastest pace in more than three decades, while the unemployment rate fell to the lowest since 1997.

U.S. government reports this week showed gross domestic product shrank more than previously estimated in the first quarter, while durable-goods orders unexpectedly declined in May. Citigroup Inc.’s U.S. Economic Surprise Index, a gauge of whether data beat or fell short of economists’ forecasts, dropped to minus 23.1 yesterday, the lowest since May 1.

Treasury Yields

The yield on the benchmark 10-year Treasury note fell as much as two basis points, or 0.02 percentage point, to 2.51 percent, the lowest since June 2.

“The market is giving up on some long dollar positions,” said Greg Gibbs, head of Asia-Pacific markets strategy at Royal Bank of Scotland Group Plc in Singapore, referring to bets the U.S. currency would appreciate. “Yields lower in the U.S. in recent sessions does contribute to the down move in dollar-yen.”

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major counterparts, slipped 0.1 percent to 1,006.58, extending this week’s decline to 0.3 percent, the most since the period ended May 2. It has fallen 1.3 percent since Dec. 31, the first drop within the first six months of any year since 2011.

New Zealand’s currency dropped 0.2 percent to 87.63 U.S. cents. It earlier climbed to 87.94, approaching the high of 88.43 set on Aug. 1, 2011, that was the strongest since exchange-rate controls were scrapped in 1985. The kiwi has risen 0.8 percent since June 20, heading for a fourth weekly gain, the longest streak since April 2013.

Won Advance

The won gained 0.3 percent to close at 1,013.60 per dollar in Seoul after official data today showed South Korea’s current-account surplus widened and foreign direct investment increased. It earlier touched 1,013.25, the strongest level since August 2008, and posted a 0.7 percent weekly advance.

“The reports are helping bolster expectations for more gains in the won,” said Hong Seok Chan, a Seoul-based currency strategist at Daishin Economy Research Institute. “Increasing foreign direct investments are a clear endorsement of confidence in Korea’s economic fundamentals.”

Sweden’s krona tumbled against all but one of 16 major peers after a report showed retail sales dropped 0.7 percent last month, more than double the 0.3 percent slide predicted by economists surveyed by Bloomberg. Riksbank policy makers will announce their decision on rates on July 3.

The Swedish currency declined 0.3 percent to 9.1971 per euro after reaching 9.2094, the weakest level since November 2011. It depreciated 0.2 percent to 6.7502 per dollar and headed for a third straight weekly decline, its longest losing streak since April.

Tuesday, 24 June 2014

European stocks retreated and were little changed after a positive opening Tuesday, as German business confidence fell to the lowest level this year.The Stoxx Europe 600 was up 0.07% at 346.54, after falling 0.5% the previous day weighed by lower-than-expected Eurozone PMIs. Among country indexes, UK FTSE 100 dipped 0.02%. Germany's DAX 30 rose 0.17% and France’s CAC 40 gained 0.31%. Spain’s Ibex 35 was up 0.03% while Italy’s FTSE MIB was down 0.04%.The German IFO survey showed Business Climate deteriorated more than expected in June. The index fell to 109.7 from 110.4 the previous month, missing expectations of 110.2. This was the tenth decline in a row.In the FX market, majors were little changed within familiar ranges in a quiet session, although the EUR/USD managed to advance to a high of 1.3615 despite IFO data.As for commodities, gold rose slightly to $1319 an ounce, while crude oil dropped 0.51% to $105.63 a barrel.

A man walks past the London Stock Exchange in the City of London October 11, 2013.

CREDIT: REUTERS/STEFAN WERMUTH

(Reuters) - Britain's top equity index fell on Monday for the first time in a week as declines in housebuilding and airline shares weighed on the market, which had been approaching record highs.

The blue-chip FTSE 100 index .FTSE, which had risen for the last four sessions, was down by 0.3 percent, or 18.30 points, at 6,806.90 by the middle of the trading day - some 2 percent below a record high of 6,950.60 points reached in December 1999.

The companies were hit by comments over the weekend from Bank of England (BoE) policymaker David Miles, one of the central bank's most dovish members, who said it was increasingly likely he would vote to raise interest rates before leaving the BoE's monetary policy committee next May.

The housebuilding and property sector has been one of the best-performing segments of the UK stock market over the last year, as record low interest rates and home-buying incentives pushed the FTSE 350 Construction & Building Materials Index .FTNMX2350 up 23.4 percent last year.

However, the likelihood that interest rates may rise over the coming year has since tempered its performance, and the construction & building materials index fell 1.5 percent on Monday.

"Interest rates may be rising sooner rather than later, and that's been the cause for a bit of a backlash for the housebuilders," said JNF Capital trader Rick Jones.

Airline stocks also suffered as the oil price, a large cost for airlines, rose above $115 a barrel on concerns over possible disruptions to supply from Iraq where Sunni insurgents seized control of more towns over the weekend.

Thursday, 19 June 2014

China says it wants to back major UK infrastructure projects and has signed £14bn in trade deals.

The news comes on the first full day of a visit by its leader.

The BBC understands the projects the state-owned China Development Bank (CDB) wants to invest in include High Speed 2 and the next generation of nuclear power stations.

A major deal between BP and China National Offshore Oil Corporation is worth about $20bn (£11.8bn).

That will run over 20 years.

CDB has signed a memorandum of understanding with TheCity UK.

The agreement will encourage CDB lending in the UK as well as trading in China's currency, the renminbi, which will open up trade opportunities in China to British businesses.

The memorandum is part of the announcements made by David Cameron and Premier Li Keqiang on Tuesday afternoon on closer Sino-UK commercial relations.

The Prime Minister, David Cameron, said: "The UK is the most popular destination in Europe for Chinese investment with more Chinese investment into the United Kingdom in the last eighteen months than the whole of the last thirty years combined."

London deal

The memorandum has been brokered by Sir Gerry Grimstone, chairman of TheCityUK.

The oil giant will supply its Chinese peer with liquefied natural gas (LNG), BP chief executive Bob Dudley said at a conference in Moscow.

Mr Dudley said the deal would be signed in London.

"It is a 20-year supply agreement on LNG. It is a fair price for them and a fair price for us. It is a good bridge between the UK and China in terms of trade," Mr Dudley said.

BP already supplies CNOOC with LNG from Indonesia.

Meanwhile, the UK's MAP Environmental and and China's ZN Shine Solar have entered into a joint venture to purchase, develop, and manage £400m of UK solar panel assets.

The project will involve a three year construction programme in conjunction with some of the UK's largest engineering and construction contractors.

High Speed 2

Sir Gerry said that his discussions with CDB on Tuesday morning revealed that they were focused on three specific sectors.

"They are interested in nuclear, high speed rail and telecommunications," he said. "High Speed 2 was one of the things they specifically mentioned [in the meeting this morning]. Knowing the finance is available is an important part of any project. This is an important development."

Despite the political controversy surrounding the £42.6bn HS2 project, CDB's position will be a welcome boost for supporters of the line.

Downing Street has previously insisted the route will be wholly funded by the taxpayer, but a large investor could come in to run the service or to build stations and ancillary connecting services. The first part of the 250mph line to Birmingham is due to open in 2026.

Premier Li offered direct help to build HS2 during Mr Cameron's visit to China last December. That offer, which came as surprise to Number 10, was quickly followed by China Railway Group, a subsidiary of the state owned China Railway Engineering Corporation, saying that it could also help with construction projects connected to HS2.

"HS2 could be an attractive investment opportunity," said Sir Gerry, who is also the chairman of pension provider, Standard Life. "This is not some wishy-washy diplomatic gesture."

"Soft power"

CDB is one of the biggest players in infrastructure development loans worldwide and is seen as an arm of Beijing's economic development policy as well as an extension of the country's "soft power" around the globe.

Sir Gerry describes it as the "trillion-dollar bank" and it spends billions of pounds every year supporting projects, particularly across Asia and Africa. CDB is now looking to extend its influence, and that of China, into Europe.

They are not alone. The Bank of China also announced a memorandum of understanding with the London Stock Exchange on Tuesday to increase its presence in the City.

On Wednesday, another state-backed giant, China Construction Bank, is expected to be confirmed as the first Chinese clearing bank designated for offshore renminbi trading in London - a shot in the arm for the City's aspirations to be the major centre outside Hong Kong for dealing in the currency.

Wednesday, 18 June 2014

The pound was about 0.2 percent from a five-year high versus the dollar before the Bank of England publishes minutes of its June 5 meeting that may signal policy makers are moving closer to raising interest rates.

The U.K. central bank’s key rate has been at a record-low 0.5 percent since March 2009, when it was battling to thaw credit markets and stimulate growth in an economy mired in its worst recession since World War II. BOE officials last increased borrowing costs in July 2007. Sterling climbed above $1.70 this week after Governor Mark Carney fueled speculation by saying in a June 12 speech that the first increase “could happen sooner than markets currently expect.”

“Carney’s Mansion House speech which happened last Thursday definitely gave the market a shock,” said Eimear Daly, the head of market analysis at London-based broker Monex Europe Ltd. “Maybe that was a slight pre-warning, a little hint that we might get something a lot more hawkish out of the minutes. The BOE could raise rates even as soon as the end of this year. We are going to go above that 1.70 level and stay there in sterling-dollar.”

The pound was little changed at $1.6982 as of 8:19 a.m. London time after rising to $1.7011 on June 16, the highest since Aug. 6, 2009. Sterling traded at 79.82 pence per euro after appreciating to 79.59 pence on June 16, the strongest level since Oct. 1, 2012.

Rate Outlook

Forward contracts based on the sterling overnight interbank average, or Sonia, show investors are betting the benchmark rate will increase 25 basis points by January, versus May before Carney’s speech last week.

The pound strengthened 9.5 percent in the past year, the best performer after New Zealand’s dollar among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro gained 1.3 percent, while the dollar slipped 0.1 percent.

U.K. government bonds were little changed, with the benchmark 10-year gilt yield at 2.78 percent. The price of the 2.25 percent bond due in September 2023 was 95.745.

Gilts returned 2.8 percent this year through yesterday, according to Bloomberg World Bond Indexes. Treasuries earned 2.6 percent and German securities gained 3.9 percent.

UK inflation data headlines the economic calendar in European hours. The headline year-on-year CPI growth rate is expected to tick lower to 1.7 percent in May. A print in line with expectations would fall in line with the three-month trend average, offering relatively little in terms of market-moving potential for the British Pound. However, it is noteworthy to mention that such UK price-growth data has tended to undershoot expectations over the past few months. If this trend continues, a soft result may encourage investors to dial back BOE tightening bets and send Sterling lower. Indeed, tentative signs of topping have emerged in GBPUSD.Later in the day, the spotlight will turn to US CPI figures. Unlike the UK, inflation data from the North American giant has steadily improved relative to consensus forecasts since the beginning of the year. That hints analysts are underestimating cost pressures, opening the door for an upside surprise. Such an outcome help trigger a bounce in the US Dollar as markets move to a more neutral setting following last week’s selloff in the run-up to the upcoming FOMC policy meeting.

The Australian Dollar underperformed in overnight trade, sliding as much as 0.4 percent on average against its leading counterparts. The selloff was triggered by the release of minutes from June’s RBA policy meeting. As we suspected, the central bank sounded decidedly dovish in its rhetoric, saying accommodative policy is likely to remain appropriate for some time as economic growth registers below trend and inflation holds on-target.

Tuesday, 10 June 2014

The yen advanced for the first time in three days against the dollar before the Bank of Japan meeting this week amid speculation the central bank’s monetary policy will support the nation’s economy.

A gauge of expected price swings for the yen versus the dollar remained near a record low, while trading in Japanese government debt almost ground to a standstill. BOJ Governor Haruhiko Kuroda said last week the policy of doubling the monetary base and purchasing government bonds is leading to improvement in financial markets and the economy. None of the analysts surveyed byBloomberg News expect the BOJ to expand stimulus when policy makers meet June 12-13.

“There’s nothing to expect from the BOJ this week,” said Kiran Kowshik, a currency strategist at BNP Paribas SA in London. “Some of the data has been weaker but then the BOJ was anticipating that and it has not really surprised them” and they probably will not signal further easing, he said.

The yen appreciated 0.3 percent to 102.23 per dollar as of 8:56 a.m. London time. One-month implied volatility in the pair was at 5.44 percent after falling to a record 5.25 percent yesterday.Japan’s currency strengthened 0.3 percent to 138.96 per euro. The euro was little changed at $1.3592 after dropping to $1.3503 on June 5, the lowest since Feb. 6.

Aussie Gains

The Aussie rose 0.2 percent to 93.73 U.S. cents after climbing to 93.76 cents, the strongest since May 19. The currency gained after China’s central bank announced measures to support smaller companies and agriculture, bolstering the outlook for growth in Australia’s largest trading partner.

Kuroda will hold a press conference after the BOJ’s policy decision on June 13. The central bank has been buying about 7 trillion yen of government bonds a month since April 2013. Only three of the 33 economists surveyed June 3 to 6 by Bloomberg expect additional monetary stimulus in July, down from 12 of 32 in the previous survey.

The Aussie has climbed 5.3 percent this year, the best performance among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The U.S. dollar has dropped 0.4 percent, the euro has fallen 1.6 percent, while the yen has gained 2.9 percent.

The Australian Dollar plunged against the US Dollar after data showed that Building Approvals took a surprise dip in its biggest monthly decline in almost a year. The Australian Bureau of Statistics released figures showing that monthly Building Approvals for April fell by 5.6 percent versus estimates of an increase of 2.0 percent; annual growth came in at 1.1 percent compared to an expected 12.3 percent rise.

This surprisingly negative data comes ahead of the upcoming RBA policy meeting where the board is expected to keep its lending rate unchanged at 2.50 percent. Further signs of weakness in the Australian economy could influence the RBA to maintain its loose monetary policy for a longer period than is currently expected.